Tesla's Model S is going on sale in China in March. But Elon Musk's company must get a cheaper vehicle on the market too.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

Tesla was Wall Street's "It" stock of 2013. Nothing much has changed in 2014.

Shares of Tesla (TSLA) are up more than 35% since the start of the year, and the stock hit an all-time high of nearly $206 Tuesday morning.

The electric carmaker will report its latest quarterly results after the closing bell Wednesday. Hopes are high -- especially since Tesla already said in January that it delivered 6,900 models of its Model S vehicles in the fourth quarter. That was well ahead of the company's (and analysts') earlier expectations.

So can Tesla keep the momentum investors happy? Or does the stock need to fall sharply again before it can go higher? Remember that this is an extremely volatile stock.

Shares plunged from their highs last fall due to negative press about a couple of Model S fires and a third-quarter earnings report that, while good, was not good enough to mollify traders.

I wouldn't bet against Tesla though. With CEO Elon Musk promising that the Model S will be available in China starting in March, that is a huge growth opportunity for the company. It's likely that Musk will discuss China plans in more detail during the company's earnings conference call.

In fact, China hopes have already lifted the stock. Last week, shares popped after China's government announced it was extending subsidies for electric cars beyond 2015. That news also led to a big rally in Chinese electric car company Kandi Technologies Group (KNDI).

It makes total sense that investors would be enthralled by the possibilities in China. In addition to being the world's most populous market, with a growing middle class, China's government has made a concerted effort to crack down on air pollution.

So it stands to reason that a company like Tesla, which only makes "clean" cars, could have a better chance of making a big splash in China than competitors that still manufacture old-fashioned gas guzzlers like GM (GM), Ford (F), Toyota (TM) and Honda (HMC).

Despite that, it's getting harder to justify buying Tesla's stock at these levels. For one, Musk did say several times last year that he thought the company was now fetching a valuation it did not yet deserve. He should know best. Of course, he's been wrong in the short-term as the stock has continued to go up.

Still, investors may worry about the high price at some point. Tesla trades at nearly 130 times 2014 earnings forecasts. That's insane.

Yes, I get that Tesla is a hyper-growth company. Analysts are projecting annual earnings increases of 25% on average for the next few years. That's a higher growth rate than notable tech companies like Twitter (TWTR), Google (GOOG) and Apple (AAPL) for example.

Speaking of Apple, I'm not sure investors should take the Apple-Tesla iCar talks that are making the rounds again that seriously.

If you're Elon Musk, why would you sell out right now? Unless he wants to focus all his attention on SpaceX, it seems odd that Musk would want to give up the keys to the electric car castle just yet. He's in the proverbial driver's seat. And I'll stop now.

With that tangent over, I think it's fair to wonder if investors are paying too much right now for potential?

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Consider that Tesla's market value is now $25 billion. GM is valued at $58 billion. But Tesla is only expected to report revenues of about $3.2 billion this year, while analysts are forecasting sales of $162.2 billion for GM.

Should Tesla really be valued at nearly half of what GM is worth even though GM's sales are expected to be more than 50 times higher than Tesla's this year?

Even if Tesla does wind up being extremely successful in China, it's going to take years for the company to catch up with its larger rivals in terms of overall sales. Analysts are predicting a healthy 50% jump in sales in 2015. But that would still only leave Tesla with about $5 billion in annual revenue.

In addition, Tesla's projected earnings growth rate, while strong, is not so strong that it merits a triple-digit P/E ratio. Analysts are predicting annual profit increases of more than 30% a year for Facebook (FB). And while there are legitimate questions about whether Facebook is also overvalued, it's not nearly as frothy as Tesla, which trades at about 53 times 2014 earnings estimates.

Now why am I comparing Tesla to Facebook? Is that really fair? I'd argue yes. The reason investors love Facebook is because of its reach. It has more than a billion users. Tesla, on the other hand, is a niche company. So that is another reason why it may not merit such a lofty valuation.

The challenges for Tesla will be to prove that it can both diversify beyond one product and also go mainstream.

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Right now, it is selling a high-end car in the Model S. The company will need to have another big luxury hit on its hands with the crossover Model X that is due out in 2015. (You can reserve one now on Tesla's website.)

But if Tesla really wants to become the new third member of the Big Three in the U.S. -- even if Palo Alto is a long way from Detroit -- then the company is also going to have to deliver on its promise to make a more affordable car for the masses.

There has been a lot of chatter about an electric car that could sell for under $40,000. The "cheapest" Model S retails for just below $70,000. Tesla filed for a trademark for "Model E" last August, sparking speculation that this could be the name for the lower cost sedan.

Regardless of what Tesla decides to call its "cheaper" car, here's hoping that Musk talks more about that during Wednesday's conference call. China is getting all the attention now. But Tesla still has to give more details about how it plans to get a lot more of its cars on the road in the next few years.

Dead Presidents. Two shout-outs in order for Twitter followers who were checking me out yesterday even though the market was closed in observation of Washington's Birthday/Presidents Day. I asked people to name the president that appeared on the now out of circulation $500 bill. It turns out there were two acceptable answers.

Congrats to you both! John Quincy Adams was on the first $500 bill. The most recently issued one had William McKinley on it. Apparently, there was also a $500 note in 1918 with Chief Justice John Marshall on it.

No word yet as to whether Groupon (GRPN) will celebrate "President" Marshall's numerous achievements for a lame publicity stunt in February 2015.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

So much for the Santa Claus rally that tends to lift the market around the holidays. Most investors are getting a lump of coal in their portfolio this month.

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